Government departments are to be encouraged to create centralised units to handle procurement for large-scale public-private funded projects, HM Treasury has announced.

A fresh approach to public-private partnerships, published today as part of the Autumn Statement, outlined plans for the replacement to the Private Finance Initiative (PFI), which it said had become “tarnished by its waste, inflexibility and lack of transparency”. ‘Private Finance 2’ (PF2), it said, will address the weaknesses of its predecessor, such as a “slow procurement process” and “insufficiently flexible” contracts.

One of the central reforms is to make greater use of centralised procurement for the private finance projects. The report said the procurement for the Priority Schools Building Programme, the first project through PF2, would be carried out by a new central unit within the Department for Education called the Education Funding Agency. Further, it said, in future all government departments will be “encouraged to establish a central unit when embarking on a new programme”.

The report also suggested that consideration is being given to a more extreme shift to centralised procurement by creating a single centralised unit covering all central government PF2 projects. The report said: “The government recognises that departmental centralisation of procurement, while representing a significant step forward, does not go as far as establishing a single, centralised procurement unit. The business case for such a unit will be kept under review during the [Infrastructure UK] and [Major Projects Authority] assessments and when future pipelines are confirmed.”

Other measures proposed for PF2 include requiring ministers to commit to an ambitious timetable, including completing the tendering phase within 18 months, simplifying the documentation involved, and for Treasury to carry out checks on projects prior to them going out to market.